IDEAS home Printed from https://ideas.repec.org/p/sur/seedps/140.html
   My bibliography  Save this paper

Tying up loose ends: A note on the impact of omitting MA residuals from panel energy demand models based on the Koyck lag transformation

Author

Listed:
  • David C Broadstock

    (Research Institute of Economics and Management (RIEM), Southwestern University of Finance and Economics, Sichuan, China and Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey, UK.)

  • Lester C Hunt

    (Surrey Energy Economics Centre (SEEC), University of Surrey, UK.)

Abstract

Energy demand functions based on Koyck lag transformation result in an MA error process that is generally ignored in estimated panel data models. This note explores the implications of this assumption by estimating panel energy demand functions with asymmetric price responses and an MA process modelled explicitly. It is found that although the models with an MA term might be preferred statistically, they result in inferential problems implying that there might be a need to revisit the specification of panel energy demand functions used in a number of previous studies.

Suggested Citation

  • David C Broadstock & Lester C Hunt, 2013. "Tying up loose ends: A note on the impact of omitting MA residuals from panel energy demand models based on the Koyck lag transformation," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 140, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    • Handle: RePEc:sur:seedps:140
    as

    Download full text from publisher

    File URL: https://repec.som.surrey.ac.uk/seeds/SEEDS140.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Adeyemi, Olutomi I. & Hunt, Lester C., 2007. "Modelling OECD industrial energy demand: Asymmetric price responses and energy-saving technical change," Energy Economics, Elsevier, vol. 29(4), pages 693-709, July.
    2. Hunt, Lester C. & Judge, Guy & Ninomiya, Yasushi, 2003. "Underlying trends and seasonality in UK energy demand: a sectoral analysis," Energy Economics, Elsevier, vol. 25(1), pages 93-118, January.
    3. Adeyemi, Olutomi I. & Broadstock, David C. & Chitnis, Mona & Hunt, Lester C. & Judge, Guy, 2010. "Asymmetric price responses and the underlying energy demand trend: Are they substitutes or complements? Evidence from modelling OECD aggregate energy demand," Energy Economics, Elsevier, vol. 32(5), pages 1157-1164, September.
    4. Lester C. Hunt & Guy Judge & Yasushi Ninomiya, 2003. "Modelling underlying energy demand trends," Chapters, in: Lester C. Hunt (ed.), Energy in a Competitive Market, chapter 9, Edward Elgar Publishing.
    5. Cai, Zongwu, 2007. "Trending time-varying coefficient time series models with serially correlated errors," Journal of Econometrics, Elsevier, vol. 136(1), pages 163-188, January.
    6. James M. Griffin & Craig T. Schulman, 2005. "Price Asymmetry in Energy Demand Models: A Proxy for Energy-Saving Technical Change?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-22.
    7. Dermot Gately & Hiliard G. Huntington, 2002. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
    8. Chen, Shiu-Sheng, 2009. "Oil price pass-through into inflation," Energy Economics, Elsevier, vol. 31(1), pages 126-133, January.
    9. Chang, Yoosoon & Martinez-Chombo, Eduardo, 2003. "Electricity Demand Analysis Using Cointegration and Error-Correction Models with Time Varying Parameters: The Mexican Case," Working Papers 2003-08, Rice University, Department of Economics.
    10. Jeff Gill & Gary King, 2004. "What to Do When Your Hessian is Not Invertible," Sociological Methods & Research, , vol. 33(1), pages 54-87, August.
    11. Hillard G. Huntington, 2006. "A Note on Price Asymmetry as Induced Technical Change," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-8.
    12. Lester C. Hunt (ed.), 2003. "Energy in a Competitive Market," Books, Edward Elgar Publishing, number 2519.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adofo, Yaw Osei & Evans, Joanne & Hunt, Lester Charles, 2013. "How sensitive to time period sampling is the asymmetric price response specification in energy demand modelling?," Energy Economics, Elsevier, vol. 40(C), pages 90-109.
    2. Olaniyan, Monisola J. & Evans, Joanne, 2014. "The importance of engaging residential energy customers' hearts and minds," Energy Policy, Elsevier, vol. 69(C), pages 273-284.
    3. Adeyemi, Olutomi I. & Hunt, Lester C., 2014. "Accounting for asymmetric price responses and underlying energy demand trends in OECD industrial energy demand," Energy Economics, Elsevier, vol. 45(C), pages 435-444.
    4. Huntington, Hillard G. & Barrios, James J. & Arora, Vipin, 2019. "Review of key international demand elasticities for major industrializing economies," Energy Policy, Elsevier, vol. 133(C).
    5. Adeyemi, Olutomi I. & Broadstock, David C. & Chitnis, Mona & Hunt, Lester C. & Judge, Guy, 2010. "Asymmetric price responses and the underlying energy demand trend: Are they substitutes or complements? Evidence from modelling OECD aggregate energy demand," Energy Economics, Elsevier, vol. 32(5), pages 1157-1164, September.
    6. Salisu, Afees A. & Ayinde, Taofeek O., 2016. "Modeling energy demand: Some emerging issues," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 1470-1480.
    7. Dilaver, Zafer & Hunt, Lester C., 2021. "Modelling U.S. gasoline demand: A structural time series analysis with asymmetric price responses," Energy Policy, Elsevier, vol. 156(C).
    8. Adeyemi, Olutomi I. & Hunt, Lester C., 2007. "Modelling OECD industrial energy demand: Asymmetric price responses and energy-saving technical change," Energy Economics, Elsevier, vol. 29(4), pages 693-709, July.
    9. Rodrigues, Niágara & Losekann, Luciano & Silveira Filho, Getulio, 2018. "Demand of automotive fuels in Brazil: Underlying energy demand trend and asymmetric price response," Energy Economics, Elsevier, vol. 74(C), pages 644-655.
    10. Sharimakin, Akinsehinwa, 2021. "Modelling asymmetric price responses of industrial energy demand with a dynamic hierarchical model," Energy Economics, Elsevier, vol. 98(C).
    11. Tajudeen, Ibrahim A., 2015. "Examining the role of energy efficiency and non-economic factors in energy demand and CO2 emissions in Nigeria: Policy implications," Energy Policy, Elsevier, vol. 86(C), pages 338-350.
    12. Frondel, Manuel & Vance, Colin, 2013. "Re-Identifying the Rebound: What About Asymmetry?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 34(4), pages 42-54.
    13. Hunt, Lester C. & Ryan, David L., 2015. "Economic modelling of energy services: Rectifying misspecified energy demand functions," Energy Economics, Elsevier, vol. 50(C), pages 273-285.
    14. Massimo Filippini & Lester C. Hunt, 2011. "Energy Demand and Energy Efficiency in the OECD Countries: A Stochastic Demand Frontier Approach," The Energy Journal, , vol. 32(2), pages 59-80, April.
    15. Filippini, Massimo & Hunt, Lester C., 2012. "US residential energy demand and energy efficiency: A stochastic demand frontier approach," Energy Economics, Elsevier, vol. 34(5), pages 1484-1491.
    16. Sharimakin, Akinsehinwa & Glass, Anthony J. & Saal, David S. & Glass, Karligash, 2018. "Dynamic multilevel modelling of industrial energy demand in Europe," Energy Economics, Elsevier, vol. 74(C), pages 120-130.
    17. Liddle, Brantley & Sadorsky, Perry, 2020. "How much do asymmetric changes in income and energy prices affect energy demand?," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).
    18. Agnolucci, Paolo, 2009. "The energy demand in the British and German industrial sectors: Heterogeneity and common factors," Energy Economics, Elsevier, vol. 31(1), pages 175-187, January.
    19. Joanne Evans & Massimo Filippini & Lester C Hunt, 2011. "Measuring energy efficiency and its contribution towards meeting CO2 targets: estimates for 29 OECD countries," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 135, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    20. De Vita, G. & Endresen, K. & Hunt, L.C., 2006. "An empirical analysis of energy demand in Namibia," Energy Policy, Elsevier, vol. 34(18), pages 3447-3463, December.

    More about this item

    Keywords

    Koyck-lag transformation; Moving average errors; Panel data; Aggregate energy demand.;
    All these keywords.

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sur:seedps:140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mona Chitnis (email available below). General contact details of provider: https://edirc.repec.org/data/eesuruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.